Abhi- Based on your team company and its latest financial statements calculate w
ID: 2724246 • Letter: A
Question
Abhi- Based on your team company and its latest financial statements calculate whether it makes sense for your firm to buy its stock and increase its dividend payout or should use any extra cash or financing capacity to strategically expand its business.
Merck & Co. Inc. (MRK)
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Currency in USD.
13,663,000
Income Statement Get Income Statement for: View: Annual Data | Quarterly Data All numbers in thousands Period Ending Dec 31, 2015 Dec 31, 2014 Dec 31, 2013 Total Revenue 39,498,000 42,237,000 44,033,000 Cost of Revenue 14,934,000 16,768,000 16,954,000 Gross Profit 24,564,000 25,469,000 27,079,000 Operating Expenses Research Development 6,704,000 7,180,000 7,503,000 Selling General and Administrative 10,313,000 11,606,000 11,911,000 Non Recurring 619,000 1,013,000 1,709,000 Others - - - Total Operating Expenses - - - Operating Income or Loss 6,928,000 5,670,000 5,956,000 Income from Continuing Operations Total Other Income/Expenses Net (1,527,000) 11,613,000 (411,000) Earnings Before Interest And Taxes 5,401,000 17,283,000 5,545,000 Interest Expense - - - Income Before Tax 5,401,000 17,283,000 5,545,000 Income Tax Expense 942,000 5,349,000 1,028,000 Minority Interest (17,000) (14,000) (113,000) Net Income From Continuing Ops 4,442,000 11,920,000 4,404,000 Non-recurring Events Discontinued Operations - - - Extraordinary Items - - - Effect Of Accounting Changes - - - Other Items - - - Net Income 4,442,000 11,920,000 4,404,000 Preferred Stock And Other Adjustments - - - Net Income Applicable To Common Shares 4,442,000 11,920,000 4,404,000 Sign Up for a Free Trial to EDGAR Online Premium!Get the critical business and financial information you need for more than 15,000 U.S. public companies.
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Currency in USD.
Explanation / Answer
From the financial statements given above. it is clear that although the Company has issued fewer shares of common stock, it has a substantial balance in the Treasury Stock. Considering that the current year profits are way below those of the previous year. reissuance of Treasury Stock will add to the dividend expenditure, thereby further reducing the profits. Hence, the advisable solution would be to use the extra cash available for strategically expanding its business, since that will lead to increased revenues, and consequently an increase in the Net Income, in the years to come.